EU member states have agreed a series of reforms to the markets in Financial Instruments Directive (MiFID II) aimed at enhancing transparency levels and limiting the growth of dark pool trading.
Agreement on the new set of rules was reached among member states' Ambassadors Wednesday morning and will be presented by Minister Noonan to EU Finance Ministers for their approval at the meeting of the Ecofin Council on Friday 21 June.
The new framework will increase the supervisory powers of regulators and provide fresh operating rules for all trading activities, including harmonising provisions concerning the activities of investment firms, regulated markets and data service providers.
The agreed text provides for a significant limitation on trading in dark pools as it introduces an EU-wide volume cap of 8% on the amount of dark trading that can be done, and a 4% cap per trading venue.
"This will improve the price formation process and provide investors with more market information, while still allowing certain legitimate transactions to be done in the dark." states the Commission.
Other elements include the introduction of new trading venues, dubbed Organised Trading Facilities, to facilitate the automation and exchange trading of OTC derivatives. Passages on non-discriminatory open access to trading venues and central counterparties and new safeguards to take account of technological developments such as algorithmic and high frequency trading also feature prominently.
Welcoming the agreement, the minister for finance Michael Noonan TD says: "We have worked extensively with member states over the past six months in getting this agreement today, which paves the way for negotiations to begin with European Parliament on finalising the legislation."
The agreement was reached following intensive negotiations among EU member states, paving the way for discussion by the European Parliament.